Phil Goff’s 10-year ‘build it’ budget finally got the green light on Thursday, with one of the provisions being that the infamous ‘bed tax’ is now set to be extended to homes listed on sites like Airbnb. What does this mean for hosts? And are other regions set to follow? (PLUS, other things you should know about the peer-to-peer platform’s contributions to New Zealand.)
If you think Airbnb is still small fry in New Zealand, then think again. According to a recently released report outlining the effects of Airbnb in New Zealand, visitors spent a massive 1.5 million nights at properties booked via the platform. And while the traditional accommodation sector still remains dominant – more than 14 million nights were booked at hotels, 12 million nights at motels, 8 million nights at holiday parks, and 5 million nights at backpackers* – Airbnb has grown in just a few years to become a credible challenger in today’s industry, one that many of its rivals argue have an unfair advantage.
That unfair advantage has mainly been in the form of tax exemptions, because not only are Airbnb hosts not required to pay business taxes in the same way hoteliers or moteliers do – something which has come up as a particular sticking point when it comes to ‘superhosts’ that pocket millions of dollars each year – but they’ve so far avoided ‘bed taxes’ as well. Passed by Auckland Council last year, the introduction of a targeted accommodation rate/bed tax proved controversial with providers at the time for spurring unbudgeted cost increases, not to mention the exemption Airbnb hosts were being afforded. But at the launch of the Airbnb report earlier this week, Auckland mayor Phil Goff said that’s set to change.
“Our budget provides for an extension of business rates where appropriate to Airbnb and the targeted rate on accommodation,” he said. “It will vary, so if you’ve got a single room you’re letting out, [those taxes] won’t apply to you. If you’re letting out your whole house or apartment then they will. If it’s for less than four weeks you’re not covered [to pay the business tax] – that’s too small to worry about. If it’s over 180 days then you’ll be paying the full business rate, with gradations in between.”
Traditional operators have obviously welcomed the change, with rates potentially dropping by up to 55% if applied to all online providers like Airbnb and Bookabach. But some have argued they don’t go far enough. Tourism Industry Aotearoa, for example, discredited the ‘room only’ exemption as such rentals make up almost half of Auckland’s Airbnb properties.
Airbnb’s head of public policy Brent Thomas, however, welcomed Goff’s proposal at the launch event, noting that the company already collects tourism taxes or ‘bed taxes’ in many of its locations around the world. Thomas also added that he didn’t believe a proposed ‘bed tax’ would discourage people from renting out their properties on Airbnb.
“We welcome the idea of an accommodation or bed tax, and I know that might be controversial with others in the industry, but we actually support it. Our community wants to pay their fair share and grow sustainably,” says Thomas. “Usually, when you look at the tourism tax, it’s only a very small percentage of a guest fee… so we don’t believe that puts people off.”
It’s not just in Auckland where conversations like these have been happening. In Christchurch, for example, where visitor numbers have jumped back to pre-earthquake levels, many have called for a more level playing field not just in terms of how rentals are taxed, but regulation around health and safety as well. Queenstown proposed last year of implementing tighter restrictions on homes rented out by absentee owners (a suggestion that was accused by Thomas at the time as “nanny state policies”), while Hawke’s Bay has also recently floated the idea of a ‘bed tax’ to help fund tourism in the region. With Auckland having taken the lead on this issue, it’s likely other regions will feel they have a greater mandate to pursue similar policies.
Despite all this, Goff was unequivocal in his support for Airbnb’s growth in the city, welcoming the competition it brought to the traditional hotel/motel industry and the more options it gives visitors on where they want to stay. He also waxed lyrical about Airbnb’s contribution to Auckland’s economy ($201 million in 2017) and the growth of almost 2,000 jobs it’s spurred in New Zealand’s biggest city. Although seeing as tourists have many reasons for visiting a certain place, it’s strongly arguable that this growth would’ve occurred without the help of Airbnb anyway.
What Airbnb has definitely helped with is providing additional accommodation for an overburdened tourism sector. We know there aren’t enough rooms to cater for the number of visitors flooding Auckland, and Airbnb – at least in the short-term – is alleviating some of that pressure.
“It’s not a zero-sum game, and for Airbnb to do well, nobody has to lose,” says Thomas. “If you look at the World Masters Games here last March, the hotels filled up and so did the Airbnbs. We see a real opportunity to collaborate with the traditional accommodation sector and see a real growth of the pie.”
Tourism, however, isn’t the only sector struggling, because while Airbnb enables the sector to flourish, that growth puts serious pressure on areas such as housing and transport. Research from earlier this year found that full-time Airbnb listings in most areas had very little impact on the private rental market, but in some popular tourist areas such as Waiheke Island, it found there was potential for Airbnb to have a negative impact for local renters.
“People say to me: ‘But doesn’t Airbnb put pressure on housing?’ Of course it does. Are we going to stop people using their houses for Airbnb? Of course we’re not. This is a free society and market economy,” Goff said while acknowledging the pressure short-term lets were putting on Auckland. “[But] tourism can be a major contributor to the provision of infrastructure in our city because of the income it provides.” Whether that cost-benefit ratio pans out of in Goff’s favour remains to be seen.
So, what else we know about Airbnb in New Zealand?
- In 2017, Airbnb guests are said to have contributed $660 million in GDP and more than 6,000 full-time equivalent jobs.
- Airbnb guests spent $781.4 million in 2017, representing 2.8% of all tourism expenditure across New Zealand. Approximately three-quarters of that spending were on things other than accommodation. The food service industry (restaurants, cafes, bars etc.) benefits the most, with a 22% share of Airbnb expenditure. Leisure activities (entertainment, museums etc.) follows a close second with a 20% share, while transportation (buses, taxis, car rentals etc) has a 14% share.
- Airbnb encourages tourism beyond just the major cities. Auckland, for example, attracted a total of 144,000 bookings, 322,000 guests, and 509,000 nights booked. Meanwhile the rest of New Zealand (that’s anywhere that’s not Wellington, Queenstown or Christchurch) attracted a total of 272,400 bookings, 662,000 guests, and 542,000 nights booked.
- Those using Airbnb the most in New Zealand are…New Zealanders. In 2017, 491,000 Airbnb guests were domestic, making up the biggest chunk of guests with 35%. Australia follows second with 17% of guests, the United States with 12%, and China at 8%.
- Over 70% of Airbnb hosts are female and have an average age of 48 years old. In 2017, the additional median income earned by hosts was $4,400.
*CORRECTION: A previous version of this article incorrectly cited figures for hotel, motel, holiday park and backpacker stays from monthly March data instead of annual data as stated. This has now been amended with commercial accommodation figures (year to March) provided by Tourism Industry Aotearoa.
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